The NCVO said it would not have attended or endorsed the launch event for the renamed Capacity Builders programme if a deal had not been struck over the duration of grants.
"There was a point at which the NCVO wouldn't have had that key presence because we felt so strongly about short-term funding," said an NCVO spokesman.
He added that the organisation considered removing its logos from signs at the relaunch event until the funding issue was resolved.
The independence of the Capacity Builders programme was also an issue in negotiations between the Government and the sector, with the NCVO adamant that the "decision-making process" should not be removed from the sector.
One senior figure in the sector said there had been a perception that under theGovernment's original blueprint, the Capacity Builders board would have been a rival to existing umbrella bodies.
It emerged this week that each of the hubs set up to implement the Government's ChangeUp infrastructure programme has been given £500,000 less than it had originally wanted.
The five hubs, designed to promote expertise in IT, development, performance improvement, governance and finance will each get £2.5m until 2007 - less than the £3m each had asked for.
"People are not happy," said Simon Hebditch of the CAF. "But they are willing to compromise rather than have nothing at all."
- See Newsmaker, p21,